Introduction to Business Flashcards

Which type of business entity provides its owners with limited personal liability while allowing pass-through taxation?

Answer: Limited Liability Company (LLC)

An LLC combines liability protection of a corporation with the pass-through tax treatment of a partnership.

In turnaround management, a '13-week cash flow forecast' is used to:

Answer: Monitor near-term liquidity and manage cash on a weekly basis

The 13-week cash flow forecast is a standard turnaround tool that provides granular visibility into weekly cash inflows and outflows.

What does 'working capital' measure?

Answer: Current assets minus current liabilities

Working capital (current assets minus current liabilities) measures a company's short-term operational liquidity.

A company operating in a 'mature' industry phase is most likely to face:

Answer: Intense competition, margin compression, and slower growth

Mature industries typically exhibit slower growth, fierce competition, and shrinking margins, increasing vulnerability to distress.

Which of the following best describes 'operational restructuring' in a turnaround?

Answer: Reducing costs and improving efficiency in core business operations

Operational restructuring focuses on improving the underlying business through cost cuts, process improvements, and performance optimization.

What is the primary purpose of a 'SWOT analysis' in business strategy?

Answer: To assess internal strengths and weaknesses alongside external opportunities and threats

SWOT analysis systematically evaluates a company's internal capabilities and external environment to inform strategic decisions.

In the context of business distress, 'covenant violation' refers to:

Answer: A company failing to meet conditions set in its loan agreements

Loan covenants are performance conditions (e.g., minimum EBITDA, maximum leverage) that when violated give lenders the right to accelerate repayment.